World wide demand for all goods (commodities to finished goods) and services isn't over and won't be for a long time. Demand everywhere is up and especially in those civilized places which slept the sleep of the centuries: all parts of Asia leap to mind. Add on natural increases in the established economies of Europe and the New World, and you have customers increasing everywhere. Then we have the real fact that demand was slower from the late 1970's to the early years of this century, so supply was allowed to run down. Supply and infrastructure of all kinds became simply inadequate to meet increased demands or just wore out or became obsolete. The recently resurgent pro-deflationist economic "winter-ists" miss the large picture on demand and the inability to service it.
Since July 2nd the CRB Index of Commodity futures (CRB) is down about 25% of its rise from 2001, or about 50% of its rise of the preceding two years. My guess is that a larger correction than we have seen since 2001 is underway and that perhaps 50% of the rise will be given up. It simply got overdone and exhausted demand temporarily. It will take a while to get back into balance.
The chart exhibits the Andrews division of the 2001 to 2008 range from the 1980 high and the simple Fibonacci division of the same range. They come out to about 390-410 on the chart. I didn't label the Elliott waves, but wave 4 of the 5 wave rise is also very nearly at that level of 400, and it is common to retrace down to wave 4 of the prior larger wave. If I am correct, I would expect one to two years of correction before a final low.
For investors it's best to keep our gold coins or other physicals but not be quick to buy commodity funds or stocks at this stage. Traders are another story and always have opportunities short or long. Sharp rallies will occur and grinding declines. Enjoy it while it lasts before inflation comes roaring back. Wait for the bargains.
Recent Comments